I would not pay $2.99 for a show. End of story. I am hard pressed to pay $1.99 for the show. Keep in mind that with so many people having PVRs your audience is shrinking.

Try $0.99 for a show instead. Think of the big picture. Numbers of downloads increase and you make more. If I missed a show would be willing to spring for a buck to watch it. Keep in mind that since you are getting all these shows for the price of your monthly bill already it is like I am paying twice for something.

TV shows are viewed differently than movies. I am paying my cable bill and 20 minutes of every hour for commercials. How many times do you want to charge me for these shows ?

24" iMac, 2 MB Pros, iPad Version 1, 2 x (iPhone 4s), Apple TV 3, a Shuffle and a couple of iTouches somewhere in the house. Spot on wall reserved for an Apple TV of some description. Oh yeah..and...

According to Apple's data here Apple has sold over 100 Million TV Shows. At $1.99US per show, that is a gross profit of $199M. If NBC claims that they were responsible for 40% of all video sales, that would mean 40 Million shows or $79.6M gross. If NBC claims they only made $15M in revenue that would mean that Apple pocketed the remaining $64.6M.

Do you really believe for one minute that NBC agreed to a business deal with Apple where they only get approx 19% of the revenue and Apple gets the remaining 81%!

Possibly, when you look at equipment out lay?
Marketing cost(s)?
Personal to make / keep it running?

OVERHEAD may have accounted for a fair amount of money, or up front cost(s) that Apple put out to get iTunes up and running?

The big media companies do not create anything. In one of their business practices, they do enable the creation of content by providing the up-front capital. But because of their lock on distribution, they can extract completely unreasonable terms from anybody who wants to get paid for producing that content.

[...]

The content cartels' days are numbered, and they're going to blame everybody they can for the extinction of their business model when it's really just the march of technology that has finally obsoleted their highway robbery.

I think the big error here and with the NBC comments is that there is a huge difference between video and music content. The up-front costs of producing and distributing music have become negligable. Any band can record and distribute near studio-quality music for next to nothing. The music industry has been and is ripe for drastic changes.

Unless we want to start watching low-budget video, the movie/TV industries are completely different. The up-front costs are immense (costs for sets, actors/actresses, special effects, etc.). Bandwidth and storage for gigabyte plus videos isn't cheap either, especially with the move to HD. My DVR is constantly full, and at "broadband" speeds, it can take an hour or more to download an HD video. In contrast, songs can download in seconds, and my entire music collection can fit on a small hard disk. Somebody is going to have to provide the capital to produce new shows, and they are going to want their cut of the successful ones.

It's unfortunate that NBC feels they can compare this to music. Most people just want to be able to watch episodes of shows they like when they can't be home to watch them (which they usually get for "free"). All the major networks have most of their shows this season for free on their websites. If I miss a program, I just go to their website and watch it (some "with limited commercial interruption"). For the few people who actually want to "own" commercial-free versions of these programs, NBC is insane to think people are going to pay more per episode than what it'd cost to buy these on DVD.

Zucker's comments also arrive just as NBC and NewsCorp. are launching their joint online video venture, Hulu.com, which aims to compete with iTunes by offering streaming TV and other commercial video content to viewers under an ad-supported model.

He said that 50 million streams of TV shows accessed on NBC.com during the month of October are proof that there is a demand for traditional TV series on the web.

Wait, I am not sure how this makes sense. Of course people are watching on the web when they can get the content for free just by simply allowing the commercial ads to pass by while they surf other web pages. oth, they were actually willing to pay for content on itms - just like everyone else says, this was gravy to them adding $15M of PROFIT to their coffers.

The unsaid part of this is that Zucker is laying down the gauntlet by starting up an online service that is meant to compete with itms. THAT is the reason that he is slamming Apple at this point - it is mainly to get publicity for hulu.com. Of course, it will be interesting to see how much money they sink into that online venture before realizing that people don't want to see content in that manner. Basically, instead of taking the $15M gravy (that would be more if the NBC programming was actually worth it), NBC will sink a ton of money into a new online venture that will likely end up costing them more money and which will be lucky to turn a profit. Then again, of course hulu.com will be a great success, just like all the other online media ventures that have tried to take on itms, which have ended up out of business and post big losses for their parent companies within a couple of years. Great business strategy, I can't wait to see GE take the write-downs on this!

Maybe someone covered this in a past article, but how does NBC doubling it's asking price make the price rise from 1.99 to 4.99? Shouldn't it be 3.99????

Anyways, nobody seems to see NBC's side of this - Apple's focus as a company is to sell OSX/Macintosh and iPods. iTunes actually has very little to do with selling music, and everything to do with selling iPods.

Apple wants to sell music at the lowest possible price because that will get more people using iTunes, which leads to more iPod sales, which leads to more Mac sales. They don't care that much about profit margins on music/TV, because Jobs and his advisors think the money is in selling the hardward.

NBC and the rest of the media giants have the opposite philosophy, and want to maximize profits on selling the songs and TV shows, which does not involve the lowest possible price. If they can sell the same number of copies of the new N'Sync album at 14 bucks, why would they want to only charge 9.99? They'll wait until everybody who will pay 14 does, then a few months later put it in the bargain bin for 9.99.

The two ideas just don't fit together, and it appears that Apple's unwillingness to compromise is going to mean a lot media companies telling them they're not going to play by Jobs' rules any more.

(by the way, I've been eating President Compté Sélection cheese while writing this - if you're a cheese fan, you won't be disapppointed!)

Why should Apple be the only company forced to do so? Shouldn't every company that sells a portable media player be forced to? Don't forget the cellphones. What about all the cheap Chinese knock-offs that are sold on eBay? How do you collect royalties from them? What happens when you have dozens if not hundreds of content providers demanding a cut as well? Bye bye profit. Bye bye product.

You misread my sarcasm
I said...: Apple should pay NBC, just like the TV manufacturers pay NBC a share of their sales, and DVD player makers pay NBC a share of their sales

The last vestige of a business that can not adapt to the market is to blame someone else for the lack of sales/revenue. That is the case with RIAA blaming the internet for stealing music, that is the case with the movie industry blaming Halo 3 sales for lack of movie goers, and that is the case here.

The last vestige of a business that can not adapt to the market is to blame someone else for the lack of sales/revenue. That is the case with RIAA blaming the internet for stealing music, that is the case with the movie industry blaming Halo 3 sales for lack of movie goers, and that is the case here.

A lot of blame should be placed on the blamer, but it's also no secret that there are more entertainment options than there used to be. For a lot of people, less time to take advantage of them.

Maybe someone covered this in a past article, but how does NBC doubling it's asking price make the price rise from 1.99 to 4.99? Shouldn't it be 3.99????

Anyways, nobody seems to see NBC's side of this - Apple's focus as a company is to sell OSX/Macintosh and iPods. iTunes actually has very little to do with selling music, and everything to do with selling iPods.

Apple wants to sell music at the lowest possible price because that will get more people using iTunes, which leads to more iPod sales, which leads to more Mac sales. They don't care that much about profit margins on music/TV, because Jobs and his advisors think the money is in selling the hardward.

NBC and the rest of the media giants have the opposite philosophy, and want to maximize profits on selling the songs and TV shows, which does not involve the lowest possible price. If they can sell the same number of copies of the new N'Sync album at 14 bucks, why would they want to only charge 9.99? They'll wait until everybody who will pay 14 does, then a few months later put it in the bargain bin for 9.99.

The two ideas just don't fit together, and it appears that Apple's unwillingness to compromise is going to mean a lot media companies telling them they're not going to play by Jobs' rules any more.

(by the way, I've been eating President Compté Sélection cheese while writing this - if you're a cheese fan, you won't be disapppointed!)

In the early 90s, I worked in a bookstore/music store. During that time, CDs were consistently $14 or $15 dollars a disc. At some time in the latter half of the 90s, prices started going upward to $16 and $17 and $18 dollars! It struck me as odd since it is the nature of technology to fall in price over time. So if the manufacturing costs of CDs were falling, why were prices going up? Because record labels basically figured they had a lock on the market (which they did) and could squeeze more money out of consumers for the same (or, in many cases, worse) products.

When digital music files (mp3, AAC, etc.) came along, it took the wind out of the sails of the labels because people began pirating music rather than pay the artificially high prices of CDs. Labels shot themselves in their collective foot when they kept prices high to feed their greed. Rather than become competitive in the digital music industry, they stuck to their old business model.

Apple's solution to the pirating of music (and TV/Movies) was to create a one-stop market where people could easily buy their digital entertainment from a trusted, safe, reliable source. In order to head off pirating, Apple correctly realized that there is a sweet spot in pricing downloads. If they are too expensive, people will still seek out pirated versions. Some people will continue to pirate this stuff, but if you find that sweet spot on price, more people will perceive that the content providers are playing fair and choose to purchase their products rather than pirate them.

NBC and Zucker would rather return to the days when the labels could keep prices artificially high to feed their greed. Apple, on the other hand, figures that, by keeping prices down, more people will pay for the content and that the labels/studios will make more profit by moving volume rather than with high prices. The low prices aren't only to keep people using iTunes, it's more importantly to keep people buying legitimate downloads. The more people who buy legitimate downloads, the more money for the labels/studios. Higher prices will only work against the labels/studios.

As others have noted, by moving away from the one-stop market for content (iTunes), NBC is putting itself back into a position where people will just pirate their content and they will lose money as a result. Others will either return to pirating, or they will purchase -- or like our family -- rent DVDs. And when I rent the DVDs, the studios don't get another dime for the DVDs after they have been initially purchased by the video store.

"A fool finds no pleasure in understanding but delights in airing his own opinions."

We sure have a lot of one-post wonders in this thread. I'm at work, so I've just skimmed the thread. Sorry if this if somebody else beat me to it but here's the condensed version of my thoughts, as a consumer, on this turn of events.

I think the big error here and with the NBC comments is that there is a huge difference between video and music content. The up-front costs of producing and distributing music have become negligable. Any band can record and distribute near studio-quality music for next to nothing. The music industry has been and is ripe for drastic changes.

Unless we want to start watching low-budget video, the movie/TV industries are completely different. The up-front costs are immense (costs for sets, actors/actresses, special effects, etc.). Bandwidth and storage for gigabyte plus videos isn't cheap either, especially with the move to HD. My DVR is constantly full, and at "broadband" speeds, it can take an hour or more to download an HD video. In contrast, songs can download in seconds, and my entire music collection can fit on a small hard disk. Somebody is going to have to provide the capital to produce new shows, and they are going to want their cut of the successful ones.

Firefly cost $2M / episode. I think it might do well at $4.99/episode on iTunes and I'd only pay $4.99 for original iTunes programming. Given how rabid the Firefly fanbase is I suspect it would do well.

Is this guy on drugs or what? If Apple did anything it opened up the market to legal music downloads. Oh I forgot - NBC decided that they wanted to screw the public and charge more. Now they are crying over it. Who cares most of NBC is lousy programming anyway. I have not seen any NBC channel in months and I dont miss it.

"Revolutions" have a habit of ending up back where they started that's why they are so named and that's only if we're lucky sometimes we get to remove the "R" but others we get to replace it with a "D"

"We know that Apple has destroyed the music business -- in terms of pricing -- and if we dont take control, theyll do the same thing on the video side," Zucker said...

One small company dared to break the stranglehold of industry giants to deliver a fair pricing model and freedom of choice for consumers. An industry that was stuck in the rut of delivering over-priced, over-hyped, over-marketed, under-talent, under-delivered, repetitive and soulless product designed to garner huge, raw profits with little expenses. Destroyed? No, they already did that to themselves. Saved might be a bit strong, but Apple did make a huge dent in illegal-downloading. More so, Apple gave consumers CHOICE AND CONTROL, something the big media companies would rather keep for themselves. Ask the Indies and artists with actual talent if they think Apple is destroying them, I think not. If anything, I'd like to see Apple drive the final nail into the coffin of the ESTABLISHED music business, let artists take more control of the product through this and other new delivery means so they get the rewards. And hopefully put an end to the talentless, MTV crap they keep trying to shove down our throats. Video? History likes to repeat itself and not so ironically, all this is the very same road the "video" industry is now traveling.

Quote:

We wanted to take one show, it didnt matter which one it was, and experiment and sell it for $2.99, he said. We made that offer for months and they said no.

Translation: We wanted to see if we could squeeze another dollar profit out of people, see how far they'd go... maybe $3.99 or $4.99 for popular shows.... then we would raise all other prices to the bargain price of $2.99.

Quote:

"Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money," he said. "They did not want to share in what they were making off the hardware or allow us to adjust pricing."

First off, the sun doesn't orbit around you sir. YOUR content does not sell hardware, it's the other way around Einstein. iTS (iTMS) content does not drive hardware sales, it's merely a value-added service in support of the hardware. The consumer doesn't have to use iTS in order to fully appreciate the hardware. If I made a vertical TV, I wouldn't expect NBC to change it's format just because I asked them to "for months."

Quote:

Its extraordinary, he said. Its like a small cable channel in our universe that is becoming very successful.

Welcome to the new reality, welcome to a market where consumers have control.

I think Superbass has it right. Apple's interest is in the driving the hardware sales (all revenue/profits go to Apple) and the additional income from content sales is gravy (thick, rich gravy, but gravy nonetheless). All Zucker has to sell is the content, so he wants to maximize revenue from that. Note that while I do not agree with Zucker's demand, Universal Music was able to cut a deal with Microsoft to get royalties from sales of the Zune (you can all stop laughing about how little Universal has probably realized from this deal), so it is not as if this idea is without precedent.

Putting aside the valid comment that this announcement is really just intended to drum up interest in Hulu, I think what is really whacked about it is the idea that NBC's video content is in any way, shape or form a significant reason that people purchase iPods. The availability to download an episode here or there of a missed show, and watch it on your iPod or on iTunes, is a convenience, but not what motivates iPod purchases. How many people does Zucker think were going to purchase an iPod but have now changed their minds because they realize that they will no longer be able to go to iTunes and download an episode of The Office? If the music companies bail it is one thing, but even with the introduction of the "large" screen iPod Touch, I don't see loss of NBC programming doing much damage to Apple's bottom line.

I think Jobs ought to let them set whatever prices they want. Apple will take 30% (or whatever it is) of their selling price, and if the music/TV companies want to be greedy and stupid about it, let them; people will just download their music and TV for free if it's too much.

I think Superbass has it right. Apple's interest is in the driving the hardware sales (all revenue/profits go to Apple) and the additional income from content sales is gravy (thick, rich gravy, but gravy nonetheless). All Zucker has to sell is the content, so he wants to maximize revenue from that. Note that while I do not agree with Zucker's demand, Universal Music was able to cut a deal with Microsoft to get royalties from sales of the Zune (you can all stop laughing about how little Universal has probably realized from this deal), so it is not as if this idea is without precedent.

Putting aside the valid comment that this announcement is really just intended to drum up interest in Hulu, I think what is really whacked about it is the idea that NBC's video content is in any way, shape or form a significant reason that people purchase iPods. The availability to download an episode here or there of a missed show, and watch it on your iPod or on iTunes, is a convenience, but not what motivates iPod purchases. How many people does Zucker think were going to purchase an iPod but have now changed their minds because they realize that they will no longer be able to go to iTunes and download an episode of The Office? If the music companies bail it is one thing, but even with the introduction of the "large" screen iPod Touch, I don't see loss of NBC programming doing much damage to Apple's bottom line.

M$ did that to get into the market and to make Apple life harder, to put a stake in the ground and cause trouble. As you can see, now everyone wants a piece of candy at the check-out, and trows a fit if they don't get it, just like my 2 year old kid (way back in time, before he hlearned better).

To my knowledge the content distributors do not get a piece of every DVD player and CD player ever created, why should they have a piece of Apple?

Distributors are always screaming, we wasted our money at the track and on expensive ladies of the night, and pay little to nothing to the artists, now we need more money, so we can stay in this fun game.

This remainds me of those calls I get at night asking to donate to charity. When questioned they finaly revealed that they keep 95% of the donation and give the rest to the charity they are collecting for.

Explain to me why Apple should pay a royalty to the content producers from their hardware sales when the record companies (and video) are not contributing to the technology and R&D to develop the new technology? If they did agree to this how much would an iPod sell for when you count in all the record companies and video producers? And should all other hardware companies, be it digital or analog (ie record) companies pay a similar profit, because surely they are benefiting just as much, or more, from the content then Apple is with their iPod/iPhone/AppleTV sales.

As others have stated, Apple's interest is in selling iPods and computers. It has created a beautiful, seemless ecosystem of hardware and software in which they sell the content and the hardware on which it is played. Their pricing is aimed at maximizing hardware sales and they do this by minimizing the cost of the content. this is at the expense of those that create the content. Their method here is not so dissimilar to the way Microsoft used its OS monopoly to muscle out the competition. Now, record companies will probably die a miserable death and good ridance. But content still cost money to create and those that devote their lives to creating and spend that money should be entitled to some to some of the rewards. As I write this, dozens of my friends in bands and who are recording engineers and producers are struggling because of the prevalence of illegal downloading and the bottom dropping out of the music business. You can blame this on the natural forward movement of technology but this is very different from, say, Kodak's struggle moving into the digital age. In that case, people no longer want the film that was the backbone of their business. But people do still want the music. And they still want the movies. And the TV shows. And writers and directors and musicians and record producers struggle hard for a long time against pretty steep odds in an effort to make a living doing what they do.

So, if Apple thinks that it has found the ultimate sweet spot, $0.99 for a song, or $1.99 for a TV show, then they should find another way of compesating artists for their work. And a royalty would be a very good way of doing this. Cable companies should be doing the same. In Harper's this month it was stated that 2/3 pf all internet traffic is music or video file sharing. Content creators are creating the demand for the service that they are selling, faster and faster internet, and they should be paying. They have monopolies in almost every place they operate. This should come with some responsibility.

Maybe someone covered this in a past article, but how does NBC doubling it's asking price make the price rise from 1.99 to 4.99? Shouldn't it be 3.99????

Anyways, nobody seems to see NBC's side of this - Apple's focus as a company is to sell OSX/Macintosh and iPods. iTunes actually has very little to do with selling music, and everything to do with selling iPods.

Apple wants to sell music at the lowest possible price because that will get more people using iTunes, which leads to more iPod sales, which leads to more Mac sales. They don't care that much about profit margins on music/TV, because Jobs and his advisors think the money is in selling the hardward.

NBC and the rest of the media giants have the opposite philosophy, and want to maximize profits on selling the songs and TV shows, which does not involve the lowest possible price. If they can sell the same number of copies of the new N'Sync album at 14 bucks, why would they want to only charge 9.99? They'll wait until everybody who will pay 14 does, then a few months later put it in the bargain bin for 9.99.

The two ideas just don't fit together, and it appears that Apple's unwillingness to compromise is going to mean a lot media companies telling them they're not going to play by Jobs' rules any more.

At least someone on here seems to get it.

The missing piece in the puzzle is that with Apple not really needing to make a profit (though I'm sure they wouldn't mind), it allows them to price competition out of the market. Amazon opens up a competing service, provides a very easy method to get that content into a user's iTunes library and Apple pretty quickly slashes prices to try to match Amazon. Not having to make an actual profit is something that any other download service obviously can't compete against.

As much as people here like to say how the studios/record labels are just greedy, at the same most of the responses seem like they come from petty thieves. "If I can't buy it from iTunes, I'll just pirate off a P2P network." Sorry, but you actually expect me to think you're not just pirating it in the first place? No, I won't defend your presumed right to steal. Like anything else, if you don't like the price of a product, you're free not to buy it, not to steal it.

I'll answer that one - zero! Having destroyed the revenue model that supports their production you won't have any BLU-RAY discs to rip (sorry but HD-DVD was never going to win) & isn't 802.11n 200Mbps+ already?

You'll probably be able to put the whole library on a current device, see argument above

Is that why eMusic (not iTunes) is the largest online retailer in the world?

Whilst I empathise with where you're coming from, be careful Nicky. When the revolution has come and the music industry looks sooo different from now you may find some of the old structures creeping back in but by then you'll be out of school and will know this. "Revolutions" have a habit of ending up back where they started that's why they are so named and that's only if we're lucky sometimes we get to remove the "R" but others we get to replace it with a "D"

McD

First point -- there is not yet a clear winner in Blu-ray vs. HD-DVD, and my guess is that neither format will end up doing very well.

Two -- 802.11n is a local network, I was talking about WAN speeds. Also, I doubt you will fit the entire Universal library on a current iPod, not even close -- many many many thousands of albums.

Three -- please reference eMusic being the largest online digital music reseller in the world. Give a reference.

Four -- not really sure what your point is, but I haven't been in school for a while now.

NBC and the rest of the media giants have the opposite philosophy, and want to maximize profits on selling the songs and TV shows, which does not involve the lowest possible price. If they can sell the same number of copies of the new N'Sync album at 14 bucks, why would they want to only charge 9.99? They'll wait until everybody who will pay 14 does, then a few months later put it in the bargain bin for 9.99.

That sounds more like the movie industry. While I rarely see price cuts on CDs, movies are often priced at a premium, with a second disc of extras, and the same movie might be available for $9.99 a year later, the bonus disc may or may not be there, and maybe another year means the movie is $5.99. As for the music industry, I've seen people claim that they rather just destory the CDs than discount them. Sometimes I do see opening week sales for CDs at $9.99, I think it might be due to preorder discounts, but after the first week, it's likely to go to $14 and stay there for as long as it's in print.

I know most of you will not agree with me, but $15 milion per ONE WHOLE YEAR is really not that much... I think it's suprisingly little.

It's a respectable number for an emerging format that is certain to see big growth over the next few years. Have any of the networks made anything even close to that with any other online outlets?

And $2.99 for TV episodes??? Heroes had 23 episodes in the first season, making it $69. I got it on DVD for about $35, including a bunch of bonus features and commentaries. I assume they'd still have some sort of season pass, but still?

Quote:

Originally Posted by karlfranz

According to Apple's data here Apple has sold over 100 Million TV Shows. At $1.99US per show, that is a gross profit of $199M. If NBC claims that they were responsible for 40% of all video sales, that would mean 40 Million shows or $79.6M gross. If NBC claims they only made $15M in revenue that would mean that Apple pocketed the remaining $64.6M.

That's assuming the shows are all sold as singles. Some of those are sold as season pass, which means less income. Not to mention the gross/profit thing already mentioned. And I wonder if networks pay to have their shows featured on the main page, or similar promotion.

Quote:

Originally Posted by mstone

If you piss off Internet savvy people, they just might go out of their way to make sure NBC's new shows are immediately available as torrents. And they'll keep Transmission on all the time to help seed them.

Except that that's the case already. With pretty much every show with any kind of a following on every network.

Quote:

Originally Posted by McDave

Is that why eMusic (not iTunes) is the largest online retailer in the world?

NBC Universal chief executive Jeff Zucker on Sunday urged colleagues to take a stand against Apple's iTunes, charging that the digital download service was undermining the ability of traditional media companies to set profitable rates for their content online.

"We know that Apple has destroyed the music business -- in terms of pricing -- and if we dont take control, theyll do the same thing on the video side," Zucker said at a breakfast hosted by Syracuses Newhouse School of Communications.

His comments Sunday were the most aggressive yet since NBC informed Apple last month that it had decided not to renew its contract to sell digital downloads of television shows on iTunes after this year.

NBC originally claimed to be seeking more control over the pricing of songs and videos that it was selling on iTunes, in addition to better piracy controls and more flexibility to bundle video content in an effort to increase revenues.

For its part in the bitter feud, Apple responded by saying NBC was asking for a twofold increase in the wholesale price of its TV show content, which would have resulted in the retail price to iTunes customers increasing to $4.99 per episode from $1.99.

Answering questions at the breakfast Sunday, Zucker offered substantially more color on the iTunes matter, explaining that it was a relatively easy decision for NBC to walk away from the Apple download service because it had only earned about $15 million from the service last year in spite of accounting for about 40 per cent of the videos sold on the store.

He said NBC routinely propositioned Apple to breach its standard pricing model and experiment with higher pricing for one hit show such as Heroes by raising the price from the iTunes standard $1.99 to $2.99 on a trial basis.

We wanted to take one show, it didnt matter which one it was, and experiment and sell it for $2.99, he said. We made that offer for months and they said no.

The NBC chief also revealed that in addition to more pricing flexibility, his firm was also seeking a cut of Apple hardware sales -- such as the iPod and iPhone -- which were capable of viewing content downloaded from the iTunes Store.

"Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money," he said. "They did not want to share in what they were making off the hardware or allow us to adjust pricing."

Zucker's comments also arrive just as NBC and NewsCorp. are launching their joint online video venture, Hulu.com, which aims to compete with iTunes by offering streaming TV and other commercial video content to viewers under an ad-supported model.

He said that 50 million streams of TV shows accessed on NBC.com during the month of October are proof that there is a demand for traditional TV series on the web.

Its extraordinary, he said. Its like a small cable channel in our universe that is becoming very successful.

The Bitter Taste of Ones Own Kool-Aid
Steve Sechrist
The Blogs and news wires are abuzz over the recent comments from NBC Universal chief Jeff Zucker who told an audience at Syracuse Universitys Newhouse School of Public Communications, Apple has destroyed the music business this seems to be the hot-button that everyone is jumping on.
In fairness to Zucker, heres what he said at the breakfast meeting: We know that Apple has destroyed the music business -- in terms of pricing -- and if we dont take control, theyll do the same thing on the video side.
While this sounds more like a quip than a declaration of war, there are issues behind the statement and the timing is no accident. The company is launching a rival download site together with NewsCorp called HULU that goes into a limited Beta this week offering over 90 different television shows and 10 movies. Not only that, from the Apple perspective, theyve moved to the dark side syndicating with Microsoft as well as AOL, MySpace, Yahoo and Comcast. But heres the rub. The site is going for an ad supported model with revenue being split between the content creator, HULU and the distribution site. According to Shelly Palmers MediaBytes.com.
But like all stories there is much more going on here. AppleInsider reported that Zuckers overtures to Apple werent just in raising the price from a seemingly modest $1.99. The $2.99 figure was the wholesale price according to Apple, meaning a 2.5X increase to $4.99 per episode for iTunes viewers. And that number was just unacceptable to the iTunes team.
Not only that, AppleInsider also reported that Zucker wanted Apple to give them a cut of hardware sales. Apple sold millions of dollars worth of hardware off the back of our content and made a lot of money, he said. They did not want to share in what they were making off the hardware or allow us to adjust pricing.
The concept is just so outlandish, its ludicrous. Imagine that. Apple didnt want to cut NBC Universal in on its hardware sales. Taken to its logical conclusion Zucker will next be demanding fees from TV manufacturers, PC makers (accessing the new HULU site) and hey, why not radio, set-top box and satellite converter box makers as well?
I think Steve Jobs nailed it back in 2005 when, after iTunes was a run-away success and the music industry was pressing for price increases, he called the industry greedy. Ok, heres what he really said:
If they want to raise the prices, it means that they are getting greedy, said Apple's CEO, Steve Jobs. If the price goes up, they (consumers) will go back to piracy and everybody loses. He added, Theft is bad, and [Jobs] the Buddhist joked that You dont want to burn in Hell.
What poor Mr. Zucker doesnt get is that the world has shifted and Buddhist Jobs discovered a workable way around the curse of digital piracy. Its simple really, offer people fair pricing, and they will gladly pay for content. Try to cheat the folks with excessive prices simply because you can and the folks will rebel. Want proof? Blogger waytogobuddy on the AppleInsider forum said it best:
Hey NBC: As a member of the demographic you are marketing to, I say Apple corrected pricing schemes. And that was up from zero (i.e. torrents) while taking down hyper-aggressive DRM. Welcome to the age where shit media content and shit usage rights only gets you shit.
The world changed in another way too. Just look at these two bloggers reply to the recent news about NBC pulling out of iTunes:
Not happy about it. But i dont watch TV anymore - if i want something i download it from itunes. And watch it when i want! As long as they have BSG and Lost im ok with it.
That's my take ... I watch what's in iTunes ... if I have to go somewhere else, I watch something else. And that's not because of my unwavering love for iTunes, it's just the way it is. It's what I have become used to. (Originally posted: October 29, 2007 Goodbye, NBC. And good riddance).
I guess ones own Kool-Aid really does warp reality. By asking Apple to share in hardware sales because of his content, Zucker actually believes iPod and iPhone customers were lining up in front of the Apple Stores with just one thought on their minds, to get this piece of hardware in order to download the really cool, super great NBC programming content.
Sip away at your Kool-Aid Mr. Zucker, but be careful, the sweet fruity taste may turn bitter come end of quarter when the sales numbers come in. SS

I think the big error here and with the NBC comments is that there is a huge difference between video and music content. The up-front costs of producing and distributing music have become negligable. Any band can record and distribute near studio-quality music for next to nothing. The music industry has been and is ripe for drastic changes.

Unless we want to start watching low-budget video, the movie/TV industries are completely different. The up-front costs are immense (costs for sets, actors/actresses, special effects, etc.).

This is all true, but they don't justify the power that the cartels wield over the producers, by far. Writers should not be having to strike over getting 8 cents per DVD sold instead of 4 cents. Yes, that's one of the issues in the upcoming WGA strike.

The thing is, Apple's attacking them on that front, too. Apple's video and music production technology (and their competitors' similar work) are making low budget productions much more palatable. Babylon 5 was a breakout example, slashing the budget of a full special effects science fiction show. Star Trek: The New Voyages is an effort coming from the fan world, but the overall trend is for production costs to come way down.

I really do think that we'll see more and more professional-level direct-to-consumer content in the coming years. Babylon 5's The Lost Tales is just the beginning. As the price of production comes down and the viability of direct-to-consumer sales increases, there will be people out there who will purely act to fund these efforts without extorting exorbitant terms from the creators.

Answering questions at the breakfast Sunday, Zucker offered substantially more color on the iTunes matter, explaining that it was a relatively easy decision for NBC to walk away from the Apple download service because it had only earned about $15 million from the service last year in spite of accounting for about 40 per cent of the videos sold on the store.

He said NBC routinely propositioned Apple to breach its standard pricing model and experiment with higher pricing for one hit show such as Heroes by raising the price from the iTunes standard $1.99 to $2.99 on a trial basis.

We wanted to take one show, it didnt matter which one it was, and experiment and sell it for $2.99, he said. We made that offer for months and they said no.

The ONLY reason that the iTMS sold that many TV shows was BECAUSE they were priced at a reasonable $1.99 per episode. Why doesn't Zucker get that?

NBC-> "WAAAAH! We are losing money WAAAAH!"

Cry me an effing river, dude.

iTMS has a superior sales and content delivery channel which maintains digital rights. Every time one of these "digital content delivery" services pops up they are fiercely inadequate when it comes to: 1)cross-platform compatibility 2)playability with ipod devices. Seeing that iPod has the majority of the portable media player market, it is a really stupid move to make a digital content delivery service that doesn't work with iPods. (walmart, microsoft, yahoo, real and napster, are you listening?)

Because iTMS is the clear leader in content delivery it makes sense to sell your content through them. So what if you get a smaller cut per song/video. Selling a million songs and netting a $.50/unit profit is better than selling 100 thousand and grossing $5.00/unit.

And when I rent the DVDs, the studios don't get another dime for the DVDs after they have been initially purchased by the video store.

Are you sure about that? I would think movie rentals are structured in such a way that the studios get a cut out of every rental. If they only got a cut of the initial sale of the DVD then there wouldn't be a difference in earning per DVD for "Land Before Time 12" and "Transformers."
That doesn't seem very Zucker to me.

Are you sure about that? I would think movie rentals are structured in such a way that the studios get a cut out of every rental. If they only got a cut of the initial sale of the DVD then there wouldn't be a difference in earning per DVD for "Land Before Time 12" and "Transformers."
That doesn't seem very Zucker to me.

I recall there was some lawsuit by a major studio over whether or not rental shops can rent out consumer DVDs, and the major studio lost.

I think Blockbuster had such an arrangement - but they have to make the arrangement. Blockbuster gets the discs for much cheaper in exchange for giving the studio bit of every rental.

NBC Universal President and CEO Jeff Zucker took another swipe at Apple and its iTunes Store Monday, saying that they are preventing media companies from selling online content at profitable rates. "We know that Apple has destroyed the music business - in terms of pricing -- and if we don't take control, they'll do the same thing on the video side," Zucker maintained. NBC recently pulled its shows off the iTunes store, and on Monday made most of them available on Hulu, a website it is creating with Fox. He disclosed that although NBC programs accounted for 40 percent of the video sold on the iTunes site, the company had only earned about $15 million from the service. Although Hulu received much applause from analysts and online critics Monday, Hulu's own feedback page quickly filled up with angry complaints from users. Many were upset that the site's "streaming" content could not be uploaded onto their video iPods or iPhones and similar devices. Others complained that Hulu shows and movies could not be viewed overseas. Several remarked that they now intend to download NBC shows illegally, noting that they had willingly been paying for them on iTunes in the past. "You guys are pretty stupid," one writer concluded.

It is all about Ego! Zucker of NBC and other content providers are pissed that Apple (Steve) is able to broker such good deals. Their egos are bruised and they don't like being told no (pricing) even if they are making money and things are going great. They only care about not being able to do what they want. Ego! Ego! Ego!

So, if Apple thinks that it has found the ultimate sweet spot, $0.99 for a song, or $1.99 for a TV show, then they should find another way of compesating artists for their work. And a royalty would be a very good way of doing this.

Apple already does. The royalty is contained in the share that goes back to the label. Whether the artist feels the royalty that actually makes it to them is fair is a separate issue, between the artist and the label, covered by their contract with the label.

Apple has made it MUCH more possible with iTMS for artists to do the indie thing and get far better royalties than possible using large labels.

Apple already does. The royalty is contained in the share that goes back to the label. Whether the artist feels the royalty that actually makes it to them is fair is a separate issue, between the artist and the label, covered by their contract with the label.

Apple has made it MUCH more possible with iTMS for artists to do the indie thing and get far better royalties than possible using large labels.

Yes, but I wrote that they should find "another way," that is in addition to what is already being paid. I know that Apple creates opportunities for indie artists, although you should know that those without the muscle of a label behind them only get 60 cents for each song rather than the 70 that goes to label acts.

Don't get me wrong, I love iTunes, my various iPods, my half a dozen Mac computers, but there are some problems.

I'm going to offer a different situation that offers a good comparison with Apple's conflict with studios. I own the writes to a play I wrote. I licensed this play to be performed at a bar in Los Angeles. In an effort to get the play up and running, I took a low up front fee in exchange for a bigger share of ticket sales. This bar has a two drink minimum. Conflict arises when it turns out the bar is giving away too many tickets, so as to get asses in the seats and sell drinks. Now, every show is going to have some amount of promotional tickets. That's business. But in this case, the bar was incentivized to give tickets away because their profit was higher from selling drinks than from selling tickets. So an arrangement needed to be negotiated to find that sweet spot, where a certain number of comps can be given away without abusing the situation.

Yes, but I wrote that they should find "another way," that is in addition to what is already being paid. I know that Apple creates opportunities for indie artists, although you should know that those without the muscle of a label behind them only get 60 cents for each song rather than the 70 that goes to label acts.

In the case of the bigger label, the artist might only get six cents. In comparison, sixty cents isn't all that bad.